Comparing Investment Solutions

The institutional investment management industry has two primary service models: the traditional consultant model and the outsourced chief investment officer (OCIO) model. It is important to understand what services each typically offers and what responsibilities the decision-makers, such as board or investment committee members, retain in the relationship.

In the traditional consultant model (non-discretionary), an organization contracts with the consultant to provide services such as advising on the investment policy statement (IPS), consulting on asset allocation, recommending investment managers and monitoring performance. In this relationship the investment committee makes the final decisions after the consultant provides information and makes recommendations.

Engaging in an OCIO relationship (discretionary) entails outsourcing some or all investment management decisions to an OCIO provider. In an OCIO relationship, the investment committee provides governance and adopts an IPS for the portfolio. The OCIO must adhere to the IPS framework and guidelines when managing the portfolio. Typical responsibilities of the OCIO provider include portfolio rebalancing, tactical asset allocation decisions, manager selection and performance reporting.

View accessible version of this chart.

Considerations

Define success. What responsibilities do you want to retain or outsource?^[2]
Time is valuable. Where is the committee’s time most impactful for success? Do they have the resources and time to make the necessary investment decisions?
Setting the long-term strategy is critical to success. A transparent provider should be flexible and work with you and tailor to your needs. What steps would the committee want to be actively involved with during the investment process?

Accessible Version of Chart

Responsibilities	Decision-maker in consultant model	Decision-maker in OCIO model
Fiduciary status	Organizational decision and service provider decision
Governance	Organizational decision	Organizational decision
Investment policy	Organizational decision	Organizational decision
Asset allocation	Organizational decision
Manager selection, monitoring & oversight	Organizational decision	service provider decision
Implementation	Organizational decision	service provider decision
Tactical asset allocation	Organizational decision	service provider decision
Rebalancing and cash management	Organizational decision	service provider decision

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Important Legal Disclosures and Information

Example of an OCIO relationship, provider vs. committee decision can vary based on preferences and the allocation of responsibilities should be tailored to the committee’s preferred approach and have the ability to evolve as needed over time
Flexibility to retain or outsource responsibilities may be subject to ERISA regulations.

The material presented herein is of a general nature and does not constitute the provision by PNC of investment, legal, tax, or accounting advice to any person, or a recommendation to buy or sell any security or adopt any investment strategy. The information contained herein was obtained from sources deemed reliable. Such information is not guaranteed as to its accuracy, timeliness, or completeness by PNC. The information contained and the opinions expressed herein are subject to change without notice.

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